Correlation Between Espey Mfg and King Resources

Can any of the company-specific risk be diversified away by investing in both Espey Mfg and King Resources at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Espey Mfg and King Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Espey Mfg Electronics and King Resources, you can compare the effects of market volatilities on Espey Mfg and King Resources and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Espey Mfg with a short position of King Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Espey Mfg and King Resources.

Diversification Opportunities for Espey Mfg and King Resources

0.32

Correlation Coefficient

Espey Mfg  King Resources

Weak diversification

The 3 months correlation between Espey and King is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Espey Mfg Electronics and King Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on King Resources and Espey Mfg is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Espey Mfg Electronics are associated (or correlated) with King Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of King Resources has no effect on the direction of Espey Mfg i.e., Espey Mfg and King Resources go up and down completely randomly.

Pair Corralation between Espey Mfg and King Resources

Considering the 90-day investment horizon Espey Mfg Electronics is expected to under-perform the King Resources. But the stock apears to be less risky and, when comparing its historical volatility, Espey Mfg Electronics is 14.52 times less risky than King Resources. The stock trades about -0.03 of its potential returns per unit of risk. The King Resources is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.02  in King Resources on December 24, 2024 and sell it today you would lose (0.01) from holding King Resources or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Espey Mfg Electronics  vs.  King Resources

Espey Mfg Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Espey Mfg Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Espey Mfg is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

King Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in King Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, King Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Espey Mfg and King Resources

The main advantage of trading using opposite Espey Mfg and King Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Espey Mfg position performs unexpectedly, King Resources can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in King Resources will offset losses from the drop in King Resources' long position.

The idea behind Espey Mfg Electronics and King Resources pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.